Retail
I cover retail, from fashion to grocery, and its dance with technology

Apple is dominating news headlines in the tech sector, but it’s just as much a big retail story. (Photo by Mairo Cinquetti/NurPhoto via Getty Images)

Apple Inc. stock jumped to another record high Wednesday, bringing its market cap ever closer to the $1 trillion market cap that no other U.S. company has ever achieved, after the release of strong iPhone sales and better-than-expected fiscal Q3 results and outlook. In addition, CEO Tim Cook, easing investor concerns about a potential impact on demand in Apple’s key growth market, said he’s “optimistic” that the U.S.-China trade war will “get sorted out.”

Apple is dominating news headlines in the tech sector, but it’s just as much a big retail story. Here are some key takeaways for retailers.

1. Get the product right first

As Apple’s results again showed, and as Victoria’s Secret recently demonstrated when it failed to win shoppers even with discounts, having the thing that consumers covet is what gets them to willingly open their wallets — even without deals. Just look at Apple’s flagship iPhone line: The average selling price jumped 19% to $724, from $606 a year ago, thanks to global demand for the iPhone X, iPhone 8 and iPhone 8 Plus introduced last year, Apple CFO Luca Maestri said on a call with analysts late Tuesday.

The iPhone X. (Anne-Marie Jackson/Toronto Star via Getty Images)

Consumers worldwide bought 41.3 million iPhones last quarter, increasing the line’s sales by 20% to nearly $30 billion, nearly three-fifths of the company total. The top-of-the-line iPhone X was again the most popular model sold, Cook said. Citing IDC data, he said iPhone sales had outpaced global smartphone market growth and gained share in markets from the U.S. to the Middle East and Africa. The iPhone's active install base jumped by at least 10%, driven by those who switched phones, first-time smartphone buyers and Apple's existing customers, Cook said.

That demand contributed to the 17% jump in company-wide sales to $53.3 billion, which Cook said is the strongest in the past 11 quarters.

2. Take note of growing mobile wallet use

The trend of consumers ditching cash and credit cards to pay with their mobile phones is on, especially via contactless tap payment services like Apple Pay. Over a billion transactions in Apple’s fiscal quarter ended June 30 were made by Apple Pay, triple the number from a year earlier, beating the number of transactions made via Square and mobile transactions via PayPal, Cook said.

Apple Pay, now in 24 markets worldwide, will add Germany later this year. In the U.S., eBay is beginning to enable its sellers to accept Apple Pay while CVS Pharmacy and 7-Eleven will accept Apple Pay nationwide this fall, Cook said. That came after a joint effort by retailers to design a rival CurrentC mobile payment system flopped two years ago.

Also worthy of close watch: Apple Pay Cash, the company’s peer-to-peer payment service facing off against the likes of PayPal-owned Venmo, is, according to Cook, already “serving millions of customers” in the U.S. less than eight months after its unveiling.

A Juniper Research study released Monday forecast worldwide in-store contactless payments would exceed the $1 trillion mark for the first time this year, a year earlier than the research firm had expected, and double to $2 trillion by 2020. It expects the number of consumers using mobile wallets from their OEM (original equipment manufacturer) device makers, including Apple Pay, Samsung Pay and Google Pay, will reach 450 million by 2020. It expects Apple Pay to be the leader, representing one in two of those “OEM Pay” users globally.

3. Make brick-and-mortar retail stores a destination

Apple's latest store opened in Milan last week.Apple

Apple, which different data sets have showed has higher sales per square foot than even traditional luxury retailers like Tiffany, last week opened its newest store in Milan. It features a glass fountain, 14 Gleditsia Sunburst trees and a team of 230 brought in from Apple stores around the world. With it, the Cupertino-based company, which generates most of its sales outside the U.S., now has 46% of its more than 500 stores located overseas, Maestri said, adding that Apple’s “retail and online stores had a great quarter.”

Under Angela Ahrendts, Apple’s senior vice president of retail and former CEO of Burberry, Apple last year set out on its first major store redesign — with the new Milan store as an example — since Steve Jobs opened the first Apple store in 2001. There was good reason: Apple's template — sleek-looking stores with open displays for consumers to try products and “genius bar” staff members with the tech knowhow to answer questions — has been widely copied.

Ahrendts has described her intent to make Apple stores “town squares” that host performances as well as “Today at Apple” sessions that would allow consumers to learn about topics from music to photography.

“In the next five years, 75% of people will shop online, but 75% of business will still be done in physical stores,” she said at the Cannes Lions International Festival of Creativity in June. “Retail isn’t going away. It’s not dying. It has to continue to evolve. It has to serve a bigger purpose than just selling.”

4. Think of wearable devices as more than a fad

Photographer: David Paul Morris/Bloomberg

While the iPhone is the biggest driver of sales last quarter, what Cook described as wearables — the Apple Watch, AirPods wireless headphones and Beats headphones — saw sales surge over 60% to more than $10 billion over the past four quarters. Apple Watch sales rose in the mid-40% range, he said, adding that demand for AirPods has “gone through the roof.”

“It reminds me of the early days of iPod when I started noticing white earbuds everywhere I went,” Cook said, adding that Apple has expanded distribution of its new HomePod smart speakers to three additional markets. “A lot of people that buy Apple products buy for the whole ecosystem, even though they might not currently use all the different products.”

Yes, ecosystem. It’s a big buzzword in the industry. Just look at what it has done for Amazon.

I have covered the retail industry for well over a decade and written for publications including the Wall Street Journal and Bloomberg News. I have also been ranked as a top industry influencer since 2013. An innate curiosity about how things work and what sets one brand apa...